Tagged: CIBIL

Some simple and straight rules to not fall in the vicious cycle of debt and high interest payments
Retrieved on 20th July 2017 | Moneycontrol.com

Shopping or paying with cards is one of the easiest things these days. Thanks to the magic of all the apps and payment gateways, using a credit card is as simple as a few dabs on the mobile screen.

But even with all the ease and convenience, paying your credit card bills requires real money. The reason many people fall into a debt trap is because they do not realise that however long the credit cycle might be, one always has to pay every penny (often times more) that you spend.

To not fall in the vicious cycle of debt and high interest payments, there are some simple and straight rules that one can follow.

Be prompt with payments

There’s a reason why credit cards are called credit, because you owe the money spent on the card to the lender. Hence, don’t expect as leeway or grace when it comes to making payments. Credit card companies are very stringent about any delays and promptly impose late payment fees, etc. Also, any delay or missing payment is also reported to credit rating agencies like CIBIL or Equifax and impact the credit score. Hence, the need to make timely payments cannot be truly overstated.

Don’t burn the credit limit

So, your card gives you a high credit limit, say 1 lakh. Why bother with the spend? Burn it all and pay later? That is surely not a good idea, namely because the percentage of credit limit consumed every month is a parameter in accounting the credit score. Hence, you are not considered to be of sound profile, if you use up say 90% of your card every month. Also, in case you track up a big bill each month, there is a possibility that you might land in financial tight spot.

Number of credit cards

People love to flaunt the cards. There’s a common belief that the more credit cards one has, the better financially networked he or she is. Well, nothing could be further from truth. The more the number of cards, the higher the possibility for over-spending. Also, each time, a credit card application is made; it is registered in the CIBIL records hence, it is best to have 2 or maximum 3 cards. In case, you desire upgrade your card to a higher one.

Credit period

Typically, there is an interest-free period on credit card purchases, which can even go up to 45-plus days. To avail this benefit, the outstanding amount has to be nil. So, if you roll over certain amount to next month’s billing, there’s no interest-free period on the new purchases.

Avoid cash

Cash withdrawals on your card do not come with an interest-free period. There could be a one-time fee plus interest charges that start from day one till you repay the amount. Given the interest rates charges and so on, withdrawing cash from credit cards should be strictly avoided, unless there is an urgency.

In the end, the simple mantra of happy credit-card-living is simple; spend less, pay all. With prompt payments and credit management, the credit card can be a nice tool that can aid you in everyday life, right from paying for your cabs or buying a new shirt. So, follow these steps and enjoy a stress free life.

A London based fintech company, RedGirraffe, is offering a facility to pay rent through credit card using its online platform “RentPay”.
Renu Yadav | New Delhi, June 15, 2017 | Business Today

Rent is generally one of the biggest component of the monthly expenditure that you make. Now, you can not only pay your rent through credit card but can also earn reward points on the amount paid. A London based fintech company, RedGirraffe, is offering a facility to pay rent through credit card using its online platform “RentPay”. For this, it has tied up with various banks including State Bank of India, ICICI Bank, HDFC Bank, IndusInd Bank, Axis Bank and Kotak Mahindra Bank. So, if you have a credit card from one of the banks that have collaborated with RedGirraffe, you can use it to pay rent.

How you can do it
To enroll for this facility you have to visit the website http://www.redgirraffe.com and create a RG Property ID by filling up the details of the rental property and attaching the rental agreement. The tenant will mention the bank account details of the landlord in the form. After submitting the form, a mail will be sent to the tenant’s mail id for giving standing instructions to the bank. After this one time registration, your monthly rent will be deducted automatically on a predetermined date.

“Bank and RedGirraffe.com have strong processes of inbuilt compliance and other tenant verification/reference checks. All the bank accounts remain automatically linked to Aadhaar and PAN details. In cases where the accounts are not linked, such customers are not allowed to transact via RentPay anyway. Apart from this level 1 verification mode, there are another 17 point checks (carried out between the bank and RedGirraffe.com) during each tenant onboarding. The verification happens over a period of 50 working days,” said Manoj Nair, Founder and CEO, RedGirafffe.com.

Why it is beneficial
The advantages of using this platform is you get 45-60 days of credit as your rent remains in your savings bank account and you earn returns on the amount. Also, if you use credit card, you can avail reward points depending on the offer that your bank is giving. “Since rent payments are typically large transactions, such spends enable customers to earn significant reward points. These points can be redeemed against the banks catalogue of over 200 options including products, gift vouchers, e-vouchers and air miles. Cardholders can even redeem points to pay their outstanding on the card,” adds Vijay Jasuja, CEO, SBI Cards. Apart from this it will also help the tenant build a good CIBIL score which can help him or her get loans at relatively better rates compared to a person with no or bad CIBIL score.

What are the charges?
A transaction fees of 0.39 per cent with a minimum of Rs 39 per transaction will be charged from the credit card holders of ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank and IndusInd Bank. Apart from this a service tax will be levied on it. So, for every Rs 10,000 rent paid the gross transaction fees including service tax comes to around Rs 45. However, in case of SBI Cards, an additional banking transaction charge of 1.75 per cent plus taxes shall be charged extra by the bank.

DPD in the CIBIL Report stands for Days Past Due. This term relates to the accounts section of the credit report. It basically explains the manner in which you have been clearing your outstanding dues related to your loans and credit cards. DPD clearly explains the number of days an instalment for an EMI or credit card bill has been missed or delayed. DPD indicates the number of days a bill or instalment payment has got on a delayed.

A DPD of ‘000’ depicts that there are no payments that are due by you. It basically means that you have cleared all your dues on a regular basis and on time.

A DPD of ‘XXX’ depicts that the lender has not recorded your information for the current month to CIBIL.

It is important to comprehend that if you have a DPD other that ‘000’ or ‘XXX’ on your CIBIL Report, then it is implied that you have not been able to pay the dues related to your credit cards and loans.

If you have been making all your outstanding payments on time regularly, then your DPD will be either “000” or “XXX”.

Impact of DPD on CIBIL Score
DPD impacts the CIBIL Score differently in different circumstances. If the DPD is “000”, then it has a positive impact on the CIBIL Score of an individual. If the DPD is “XXX”, then there is no impact of it on the CIBIL Score. If the DPD is some number instead of”000”, then there is a negative impact on the CIBIL Score.

Correction of DPD entries in CIBIL Report
Borrowers do not default their payments always with an intention to do so. It sometimes happens without any intention. This happens when some unforeseen circumstances arise. These unforeseen circumstances include layoff, divorce, and bankruptcy.

Example: If an individual has lost his job and due to this, he has made a default on the credit card payments that were due in his name. Usually, he would be recommended to close the account. But doing this is not the optimal solution for this problem. In such situation, the most feasible solution is to restructure the total amount that is related to the credit card.

It is very crucial to have a CIBIL report that is healthy so that you have a good track record along with a credit history that is good.

CIBIL Report FAQs:1. What happens to the DPD value when there is a default on a payment?

In a case of a payment default, the DPD starts getting a negative number.

2. What is the DPD when a cheque gets bounced?

If a cheque has been bounced and when a loan payment has been missed, then there will be one entry of DPD for the respective month. This relates to a value that is 30 and it depicts that the dues for that month have not been cleared.

3. What happens when you have cleared the due payment in the next month?

If you have cleared your last months due payment, then the DPD value in the next month becomes normal.

4. What happens if the due payment is not made?

If an individual has not cleared the payments that are due, then a value of DPD will increase and reach 60. This signifies that you have not cleared your dues from the last 2 months.

5. Can the value of DPD be changed?

No, the DPD value cannot be changed at all. If your lender does not find your DPD to be good, then your loan or credit card application request will get rejected. In such a scenario, you need to wait for a certain period of time until some new information is added to your credit report.

Banks will pay fees to Cibil, while customers need not pay any charges
Priya Nair | Mumbai | March 31, 2017 Last Updated at 01:43 IST | Business Standard

TransUnion Cibil is now helping borrowers get the best loan available based on their credit scores and history, in possible competition with online retail loan aggregators or marketplaces.

The oldest credit information company in the country has started Cibil Marketplace, which is a formal way of helping individual consumers secure loans, said Hrushikesh Mehta, vice president and head, Direct to Consumer Interactive at TransUnion Cibil.

Banks will pay fees to Cibil, while customers need not pay any charges.

So far, Cibil has tied up with 13 banks to offer retail loans like personal loans, credit cards, loan against property, home loans and business loans.

The difference between Cibil and other marketplaces is that in the case of the latter the credit report is accessed after the customer clicks the loan offer, while in the case of Cibil the customer first checks the credit score and then applies for the loan.

When a borrower logs on to Cibil’s website to check the credit score, he has the option to apply for a loan. Then he has to submit his income and KYC details.

Based on the credit score and other criteria, the borrower will get a list of banks that are willing to give him a loan.

He can choose one bank and apply for the loan. The bank will then get in touch with the borrower to complete the processing of the loan.

“Chances of the loan getting approved are higher because banks will offer the loan only to eligible borrowers. For unsecured loans credit report plays a large part in approving the loan,” said Hrushikesh Mehta.

Other market places, too, will eventually move to the pre-screening model being followed by Cibil, he added.

While the service was launched in the pilot phase a couple of years back, Cibil has started focusing on it in the last few months after approval from the Reserve Bank of India and its stake holders, some of which are banks.

Since February, when Cibil started offering free credit score and report as per RBI guidelines, 40,000 consumers have availed the service. About 20-35 per cent of those who checked their reports and found they were overdue paid off their debts, Mehta said.

Your credit score indicates your financial health, thereby determining your creditworthiness. Credit scores are provided by institutions such as CIBIL, Experian etc., among which, CIBIL is the most popularly used mechanism for lending. Credit bureaus assign a score to you on the basis of evaluation of your loan repayment habits and credit card history.

How to read your credit score
The credit score is typically represented in a triple-digit number ranging between 300 and 900 points. While higher points reflect financial discipline and a good credit standing, lower credit scores reflect poor repayment habits—which, in turn, could reveal poor money management skills. Banks and lending institutions usually prefer a credit score of 750 and above for issuing a loan or credit card. A high credit score could help you get loans at the best interest rates available. For people who do not have a credit history, the credit score reflects to be -1.

What does your credit score say about you?
Let’s look at the various aspects of your financial life that your credit score throws light on.

Timeliness: A crucial component in computing your credit score is timeliness in repaying loans and credit card bills. CIBIL, for instance, gives timely repayment about 35% weightage in calculation of credit scores. If you pay your bills on time, you are considered to be disciplined and committed towards the repayment of your dues. While a one-off case of delay may be ignored by the credit card company, repeated delays would earn negative scores.

Trustworthiness: Banks and financial institutions consider you to be an eligible borrower if your credit score is robust, as it reflects trustworthiness. A poor score indicates increased dependence on credit and lack of timeliness in repayment, which after a point may reflect lack of integrity and therefore intent to pay back.

Credit hungriness: A credit report also indicates your dependence on credit. This is assessed in terms of your credit utilization ratio, which refers to the percentage of credit you use from what’s available. A high credit utilization ratio shows credit hungriness irrespective of when you repay it.

What if you don’t have a credit score?
It may be great to never have to take a loan. But from the point of view of developing a credit history, it’s important to have some form of credit, be it loans, credit cards, or EMI store purchases.

If you have never availed any form of credit, the credit bureaus and banks wouldn’t have a credit history to analyse you with. This could make things tricky for you if you approach a bank for loan in future.

So, how do you show a history of timely repayment? You can start with taking a secured loan or credit card and maintain a record of timely repayment to be on the good books of the banks.
(The writer is CEO, BankBazaar.com)

New Delhi: State-run Bank of Baroda recently reduced home loan rates by 70 basis points to the industry’s lowest level of 8.35 percent that will be applicable for customers having a strong Cibil scores.

BoB has reduced its marginal cost of fund based lending rates (MCLR) by 55-75 basis points across all tenors.

The highest home loan rate would be at 9.35 percent. The new rates would be applicable to all loans sanctioned with effective from January 7.

For the scores the bank will initially rely on credit scores of Credit Information Bureau of India (CIBIL)

The home loan rate is linked to their Cibil scores. A customer with a Cibil score of 760 and above will be offered the lowest rate of 8.35 percent.

Your Cibil score is decided by the factors of discipline that you maintain in repaying your existing loans.

If your credit score improves, you will have to pay less EMI, and the other way around.

Considering that you have a good Cibil score and you pay the lowest interest of 8.35 percent then on a home loan of Rs 50 lakh, it will translate into a saving Rs 2,496 a month and around Rs 9 lakh for a 30-year loan.

For the first-time borrowers, who don’t have any credit history with any credit information bureau, they will be charged 8.85% interest.

If you’re applying for a loan or a credit card, your lender would look into your credit history. A CIBIL score of 750 or more is considered desirable by most lenders. If you’ve been prompt in repaying your credit card bills and other loans, you should have a sturdy score.

But every now and then, people get a rude shock with their CIBIL score which prevents them from getting a loan product of their choosing. This means that their loan application may get rejected, or they may be offered a loan with a high interest rate.

Your CIBIL score could be low for broadly two reasons — Data in your CIBIL report is incorrect, and that you have defaulted on a loan or have been irregular with your repayments.

The first step towards ascertaining the details of your CIBIL report is to get a copy of it. You can do this for a fee of Rs 550 from the CIBIL website. Your report will be generated instantly and its details will be shared with you on your email.

Next, it carries details of every credit card account or loan account you’ve opened with regulated entities such as banks and NBFCs. Any discrepancy in this data needs to be checked and challenged. Ascertain that the details in your report pertain to you and your own credit history. If you’ve mistakenly been assigned someone else’s credit history — especially an adverse credit history — your credit score would suffer.

*Check repayment details: Next in your report, go through the details of all the borrowing accounts you’ve opened: Credit cards, personal loans, home loans, car loans, etc. You also need to check the monthly repayment details of all these accounts. The CIBIL report would reflect any delays in repayments (as ‘days past due’), defaults, settlements, write-offs, value of collaterals offered, etc. Ascertain that all the details are correct and that these accounts actually belong to you. This data is reported to CIBIL by your lender. If any detail has been reported in a way that adversely impacts your borrowing history, your credit score would suffer.

*Raise a complaint: CIBIL allows you to challenge incorrect reporting through its website. You can also contact them through post. When you access the online copy of your report, you can go over your personal and financial details. Any details that you want to be corrected need to be reported to CIBIL, which will then contact your lending institution for amends. This process may take up to 30-45 days. If the lender accepts the corrections, they will reflect in your report. If the lender refuses to accept your corrections, you will have to get in touch with them directly. This is because CIBIL prepares your report from information received from your lender. Therefore, CIBIL cannot directly change the contents of your report.

Defaults, Delays In Repayments, Credit-Hungriness
If you have neglected repaying your loans, it would hurt your credit score hard. Let’s take a quick look at your options to address this problem:

*Repay loan balances on time: Whether you have loans or credit card dues, always aim to settle them as per your repayment plan. If there are difficulties in repayment, always keep your lender in the loop so that the lending terms may be made easier. With credit cards, always pay the full due amount rather than the minimum amount.

*Don’t be credit-hungry: Don’t apply for too many loans or credit cards, especially within a short time. With application, the lender will check your credit history. Too many queries into your credit history would reduce your credit score since you will be seen as a credit-hungry person. Also, having too many loans at the same time means you will have to manage several EMIs every month, which would adversely impact your liquidity and could lead to default.

*Increase credit limit on card: Try and spend no more than 20% of your credit card limit. For example, if your monthly spending limit is Rs 1,00,000, restrict your spending to Rs 20,000. It means that your credit utilisation ratio (CUR) is 20%, which is ideal. A frequently high CUR would portray you as being in constant need of short-term credit.

Asking your credit card provider to increase your spending limit, or having multiple credit cards, can help reduce your CUR. For example, your increased spending limit could be Rs 2,00,000, whereas your monthly spending is Rs 20,000, thus bringing your CUR to 10%. Also, if you have multiple credit cards, you could divide your spending between them, thus maintaining an optimum CUR on all cards rather than increasing the CUR on a single card.

*Don’t settle: If you’ve defaulted on your payments, your lender may offer you an option to ‘settle’ your loan. This means paying a percent of your principal and interest due, and considering the loan account closed. Taking this option would reflect in your CIBIL history and it would adversely impact your credit score. Any lenders you approach would see that you were unable to repay your loan. Therefore, do not take the settlement option if you can settle loans in full.

*Repay a mix of credit: You should have a history of repaying a mix of short-term or unsecured credit such as credit card balances and long-term or secured credit such as home loan. The timely repayment of a mix of credit instruments would reflect well on your credit history.